Discuss on the Electric Company’s Tetrafactory Location Decision longrun country ‘Ghana’ : factors that have influenced their economic growth.The Electric Company’s Tetrafactory Location Decision
The Electric Company (NASDAQ: TEC) has successfully manufactured lithium-ion batteries for electric
vehicles over the last five years. It sells them primarily to automakers in the United States and Europe.
We expect the electric vehicle (EV) battery industry to grow 60% in the next five years and for electric
vehicles to hold a 35% market share in the automobile industry by 2040. To meet this expected demand,
TEC is looking to open a manufacturing plant abroad.
The demand for electric vehicle batteries will significantly increase in the long-run, even in nations with
current low levels of demand, such as Latin America and Asia (non-China). See graph below for the
estimated trajectory according to Bloomberg.y expanding to a second manufacturing location, we estimate we can cut our production costs by 30%.
The Terafactory will provide the highest quality Lithium Ion Electric Vehicle batteries for large
automobile manufacturers across the world. Our goal is to increase battery production just as those
companies are ramping up their electric vehicle production. Five major automobile makers have already
committed to partner with us internationally.
Our rival Tesla has recently invested in a new facility in Nevada, the Gigafactory. By 2020 they expect to
produce 500,000 batteries annually to support its lower-cost Model 3 sedan.
Our new Terafactory will produce 700,000 electric vehicle batteries annually with quality that equals
Tesla’s. The Terafactory will be a zero-waste 10 million square foot production advanced facility. This
massive facility will require 750-1,000 acres. The facility will have state-of-the-art production
technology. It also includes a solar power station that will provide 100% of its power needs.
Production Facility and Output
The Terafactory’s output of 700,000 batteries a year is 40% higher than planned production at Tesla’s
plant, but our cost will be slightly lower. The construction of the facility and purchasing of the machinery will require a large capitalinvestment. Like Tesla, we will spend $1.5B on manufacturing equipment. We have funding
commitments from our retained earnings and a line of credit from several large banks in the U.S. and
Europe.
We are looking to locate in a country that can provide considerable savings in the construction of this
facility. Thus, total cost for our facility will range from $3B – $3.5B, a bit less than Tesla’s cost of $4B.
And we anticipate labor costs for operations that are far below U.S. levels.
Labor Requirements
The Terafactory will employ over 6,500 people and provide tremendous economic stimulus to the
chosen location. The Terafactory will require an educated and skilled work force. The company
workforce will consist of:
●Roughly 5% Management: Requires advanced degrees in specialized areas
●Roughly 15% Administrative (Marketing, Legal, Business Development, etc.): One third require
at a minimum high school, 2/3 require a bachelor degree or more.
●Roughly 20% Engineers (Electrical Engineers, Software Engineers, etc.): Requires at a minimum
bachelor of engineering. About half have a masters or relevant work experience preferred.
●Roughly 40% Technicians: Requires at a minimum a high school diploma with some college or
specialized training preferred.
●Roughly 20% support staff (janitors, carpenters, etc.): Most positions require some vocational
training or experience.
Most of the inputs for the battery will be imported raw materials and manufactured inputs. There will be
a few thousand jobs at local suppliers (ranging from accountants and truckers to producers of some small
metal parts). And there should be far more jobs meeting the needs of our workforce: local restaurants,
Uber drivers, etc.
Your Group’s Tasks and Deliverables
Guidelines
●Your team will apply macroeconomic theories to help to The Electric Company (TEC) choose a
location for its Terafactory. Each deliverable below should include both a theoretical framework and
data that are relevant to decision about the Terafactory’s location. Students are encouraged to study
countries that are foreign to their experience.
●The project is to be undertaken by a group of four or 5 students. In rare cases the group may be
slightly smaller or larger (subject to prior approval).
●The focus of each deliverable is applying the analytical approaches we learned in class to this
business decision.
Specific Aspects and Assumptions
TEC’s Terafactory has several aspects that are important for the location decision.
It involves a large capital expenditure.
●TEC is raising the financing for the production facility in US$ outside of the destination.
●The production facility involves the specified types and skills of labor.
●This facility will be the main worldwide supplier of this product for TEC.
●Failure of this project will imperil TEC’s corporate survival.
Your task is to evaluate country Ghana as the base for worldwide
production and distribution of your product.
Analyze each country’s historical record of economic growth; the factors that have influenced this growth,and provide projections for future long-term growth based on current conditions and anticipated future conditions.The key to this analysis is looking at how the long-run trends in your countries relate to TEC’s decision for locating the Terafactory. If the current conditions are negative or positive, how likely are they to change? You should mention most of the factors of production (capital, human capital, R&D/learning, and infrastructure/transport). Then also think about the causes of the factors (rule of law, corruption, etc.).
Tell me long-term factors of production and their determinants, not short-term drivers of aggregate demand (e.g., consumption or exports growth, etc.), expected growth next year, inflation, or other business cycle factors. You will discuss those issues in Deliverable 3. Nothing about unemployment, GDP growth or inflation since COVID (though COVID might affect long-term growth if it disrupted factors of production, institutions, etc.).
Relate each fact you give to TEC’s decision. For example, what level of schooling is relevant?
Recall you should ignore factors of production will Terafactory not source locally.
THIS IS A GROUP ASSIGNMENT so I only need to write part about the factors that have influence ghana’s economic growth and 1 page only
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